HSBC Bank, Daimler Canada, British Columbia tap markets; Spy Hill Power details roadshow

By Cristal Cody

Prospect News, Jan. 9 - HSBC Bank Canada brought a C$1.25 billion offering of seven-year deposit notes on Wednesday, following C$2 billion of deposit note deals from the Bank of Nova Scotia and National Bank of Canada the previous day, according to an informed bond source.

Also in the investment-grade market, Daimler Canada Finance Inc. priced C$500 million in two tranches of notes.

"Credit markets are off to a good and active start to the year," a bond source said. "The new issue market is alive and well. Investors seem to have plenty of cash to put to work, and all these new issues have gone smoothly so far."

Bombardier Inc. sold an upsized U.S. dollar-denominated $2 billion in two tranches of senior notes in the U.S. high-yield market on Wednesday.

In the Canadian provincial market, the Province of British Columbia tapped its existing 2.7% notes due Dec. 18, 2022 in a C$500 million offering on Wednesday.

For the rest of the week, additional primary action is expected, including more deposit note issuance on the heels of HSBC Bank Canada's deal and the Bank of Nova Scotia's C$1.25 billion sale of five-year senior deposit notes and National Bank of Canada's C$750 million offering of three-year deposit notes on Tuesday, a bond source said.

"Banks are out of blackout, so they're good to go," the source said.

In other offerings expected, Spy Hill Power LP will hold a roadshow for C$152 million of senior secured amortizing bonds through Tuesday, with pricing dependent on investor feedback, a source said.

Corporate and provincial bond spreads ended modestly weaker on the day, according to market sources.

"Yesterday, we were 1 [basis point] to 2 [bps] weaker just on supply," a source said. "Spreads are little changed to slightly wider today, but not much."

The Markit CDX Series 19 North American investment-grade index eased 1 bp to a spread of 87 bps.

The Markit CDX Series 19 North American high-yield index fell to 102.32 from 102.38.

Government bonds closed flat. Canada's 10-year note yield was unchanged at 1.91%. The 30-year bond yield ended flat at 2.48%.

HSBC Bank Canada prices

HSBC Bank Canada (Aa2/AA-/DBRS: AA) sold C$1.25 billion of 2.938% seven-year deposit notes at par on Wednesday, a bond source said.

The notes due Jan. 14, 2020 priced at a spread of 122 bps over the Government of Canada bond curve, or 128.6 bps over the government benchmark. The notes were launched at 123 bps, plus or minus 2 bps, over the bond curve.

HSBC Capital (Canada) Inc. was the bookrunner.

Vancouver, B.C.-based HSBC Bank Canada is a subsidiary of London-based banking and financial services company HSBC Holdings plc.

Daimler Canada sells notes

Daimler Canada Finance (A3/A-/DBRS: A) sold C$500 million in two tranches of notes on Wednesday, according to an informed bond source.

In the first tranche, the company priced C$400 million, upsized from C$300 million, of 2.23% notes due April 18, 2016 at par to yield a spread of 89 bps over the Government of Canada bond curve. The notes priced on the tight end of guidance of 92 bps, plus or minus 3 bps, over the curve.

Daimler Canada also sold C$100 million of floating-rate notes due July 16, 2015 at par to yield 58 bps over the three-month Canadian Dealer Offered Rate.

Scotia Capital Inc., Bank of America Merrill Lynch, CIBC World Markets Inc. and TD Securities Inc. were lead managers.

The Ontario-based company is the Canadian financing arm for German automaker Daimler AG.

Bombardier upsized

After pulling a $1 billion deal last November due to unsatisfactory market conditions, Bombardier returned on Wednesday and doubled the transaction's size.

The company priced $2 billion of non-callable senior notes (Ba2/BB) in two tranches.

The deal featured a $750 million tranche of three-year notes, which priced at par to yield 4¼%, on top of yield talk, and a $1.25 billion tranche of 10-year notes, which priced at par to yield 6 1/8%. The 10-year notes came in the middle of the 6% to 6¼% yield talk.

Before doubling in size, the deal had been announced on Wednesday morning as a $1 billion three-part offering. A proposed tranche of non-callable eight-year notes was withdrawn.

The timing of the transaction was moved ahead, as it was announced as business expected to price on Thursday or Friday.

J.P. Morgan Securities LLC was the bookrunner.

Proceeds will be used for general corporate purposes.

The issuer is a Montreal-based manufacturer of transportation services

British Columbia taps market

Also on Wednesday, the Province of British Columbia (Aaa/AAA/DBRS: AA) priced C$500 million in a reopening of its 2.7% notes due Dec. 18, 2022 at 99.748 to yield 2.729%, according to an informed bond source.

The notes priced at a spread of 82 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the lead manager.

The province last tapped the issue on Sept. 25 in a C$400 million offering that priced at 100.47 to yield 2.647%, or a spread of 82 bps over the Government of Canada benchmark.

The issue originally priced on May 29, 2012, when the province sold C$500 million of the notes at 99.582 to yield 2.746%, or 91 bps over the Canadian government benchmark.

The total outstanding is C$1.4 billion.

Spy Hill Power sets roadshow

Spy Hill Power is expected to continue a roadshow for C$152 million of senior secured amortizing bonds (DBRS: A) into the week of Jan. 14, according to an informed source on Wednesday.

The company plans to hold the roadshow for the series A bonds due March 31, 2036 in Toronto on Friday and Montreal on Tuesday along with a national investor call later on Tuesday.

CIBC World Markets and Casgrain & Co. Ltd. are the bookrunners. BMO Capital Markets Corp. is a co-lead manager.

Proceeds will be used to repay C$110 million in bank debt, cover C$32.9 million of interest rate swap breakage and make a C$5.6 million distribution to Northland Power Inc.

Spy Hill Power is indirectly owned by Northland Power and secured by all assets of ProjectCo., a special-purpose entity created to own, build and operate an 86 megawatt peaking facility about 200 kilometers east of Regina, Sask., under a 25-year peaking power purchase agreement with electric utility SaskPower.

Paul A. Harris contributed to this review

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